Briefing Note for Members: Mid Market Rent

The Scottish Parliament has this week confirmed that private rented sector (PRS) rent increases will be capped at 3% until 30 September. In effect, this also enforces a 3% cap on Mid Market Rent (MMR) tenancies offered by RSL subsidiaries. This is because the Cost of Living (Tenant Protection) Act classified MMR as a form of private tenancy, despite its key role in Scotland’s affordable housing offer.   

SFHA members have been clear the MMR model is simply not sustainable if it is subject to the PRS rent cap, due to the need to predict rents over the lifespan of a 30-year business plan. It is worth noting that service charges and rents are taken together in MMR tenancies. Therefore, a 3% increase in rent will result most or all of the increase being swallowed up meeting service charge costs. 

Rents are permitted to be increased once in a twelve month period, with three months’ notice.   

In a Private Residential Tenancy Agreement, the specified rent charge includes services provided by the landlord such as stair cleaning/ lift maintenance etc. Often, the landlord will instruct a contractor to undertake services on behalf of the landlord. The landlord is not in control of any increase applied to the cost of services.  

There is an additional difficulty in how MMR fits with the Cost of Living Act. PRS landlords can apply to Rent Service Scotland for an uplift from 3 to 6% rent increase, if this is reflective of their costs. Scottish Government has confirmed to SFHA that RSLs who provide MMR can also do this: but must make an individual application for each property concerned. Given that members can have many hundreds of properties, this is totally impractical for both our members and Rent Service Scotland.  

SFHA has consistently lobbied to have MMR properties provided by RSLs or their subsidiaries redesignated so they would be considered social rather than private tenancies, and continue to strongly make that case. We are hopeful for a solution in the upcoming Housing Bill. We want Scottish Government to: 

• Remove Mid Market Rent from the private sector rent cap where it is provided by an RSL or its subsidiary 

• Allow RSLs to make batch applications for the additional rental increase where there is a uniform increase in costs across all of their properties